MF1 v National Crime Authority

[1991] FCA 462

Re: "MF1"; "MF2" and "MES"
And: NATIONAL CRIME AUTHORITY
Nos. V G130-132 of 1991
FED No. 462
Administrative Law
5 ACSR 353

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIAN DISTRICT REGISTRY
GENERAL DIVISION
Heerey J.(1)

CATCHWORDS

Administrative Law - application for order of review - decision of National Crime Authority - summons to produce documents - refusal to produce documents - relevance - whether "reasonable excuse" for refusal - s.30(2)(c) National Crime Authority Act 1984 - relevance in the context of investigation - principles governing judicial review of decisions of Authority

National Crime Authority Act 1984: ss.12(1)(a), 13(1) and (2)(a), 25(2), 28(1) and (7), 29(1)(b), 30(2), 32(2), (4) and (8), 51

Companies Act 1981: ss.229(1)(b), (3) and (4), 253(1)

Corporations Law: s.258(1)

Crimes Act 1914: s.86(1)(a)

Controlled Consultants Pty Ltd v Commissioner for Corporate Affairs (1985) 156 CLR 385

Corporate Affairs Commissioner of New South Wales v Yuill (1991) 10 Leg Rep 1

Lockwood v Commonwealth (1954) 90 CLR 177

Mannah v State Drug Crime Commission (1987) 13 NSWLR 28

Melbourne Home of Ford Pty Ltd v Trade Practices Commission (1980) ATPR 42,402

Riley McKay Pty Ltd v Bannerman (1977) 31 FLR 129

Ross v Costigan (No. 1) (1982) 41 ALR 319

Ross v Costigan (No. 2) (1982) 41 ALR 337

Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285

HEARING

MELBOURNE

#DATE 9:8:1991

Counsel for the Applicant: A.C. Archibald QC with H.M. Symon

Solicitors for the Applicant: Corrs Chambers Westgarth

Counsel for the Respondent: M. Rozenes QC with B.E. Walters

Solicitors for the Respondent: Australian Government Solicitor

ORDER

The applications be dismissed.

The applicants pay the respondent's costs including reserved costs.

The documents lodged with the Court under s.32(3) of the National Crime Authority Act 1984 be retained for a period of 21 days and then, if an appeal be instituted, until the hearing and determination of the appeal, but otherwise they be then returned to the solicitors for the applicants.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

In the course of a special investigation by the National Crime Authority ("NCA") summonses were issued to the proper officers of companies to produce documents at a hearing. Counsel on behalf of the persons summoned claimed that some of the documents could not conceivably be relevant to the special investigation and that therefore there was a "reasonable excuse" for refusing to produce them: s.30(2)(c) of the National Crime Authority Act 1984 ("the Act"). The member of the NCA conducting the hearing decided that this claim was not justified. A review is sought of that decision by this Court under s.32(2) of the Act.

1. The matter that has been referred to the NCA under s.13(1) of the Act for investigation is whether any relevant offences have been committed in relation to certain allegations, the general nature of which is described in the Attorney-General's notice as follows (because of confidentiality requirements a pseudonym replaces the name of the company):
   

That, in and in relation to transactions concerning (directly or indirectly) the disposal and/or acquisition of securities in ABC Company Limited, certain directors of that company, alone, or in concert with other persons, improperly used their positions as directors of that company, and improperly used information acquired by virtue of those positions, in order to gain an advantage or advantages for themselves or some other person or persons or to cause detriment to that company and that with fraudulent intent, certain directors of that company, alone, or in concert with other persons, failed, in relation to the said transactions, to act honestly in the exercise of their powers and the discharge of the duties of their office as directors of the said ABC Company Limited.

1. The offences specified in the notice are breaches of s.229(1)(b), (3) and (4) of the Companies Act 1981 and conspiracy, contrary to s.86(1)(a) of the Crimes Act 1914, to commit those offences.

2. For the purpose of this special investigation the NCA conducted hearings and on 25 February 1991 it issued a summons under s.28(1) of the Act to ABC Company Limited by its proper officer to appear on 4 March before the NCA to give evidence and to produce documents described in a schedule to the summons as follows:
   

All minutes of meetings of the Board of Directors of ABC Company Limited including attachments, annexures and documents recorded in the said minutes as being tabled, discussed or approved between 1 January 1986 and 1 January 1989.

1. This summons is the subject of proceeding VG 130 of 1991. On 6 May 1991 two further summonses were issued returnable on 17 May. One of these sought documents described in the same terms as in the February summons except that the period referred to was 1 January 1989 to 1 November 1989. It also sought documents similarly described of the Board Committee of ABC Company Limited between 1 January 1986 and 1 November 1989. This summons is the subject of proceeding VG 131 of 1991. The other summons issued on 6 May was addressed to the secretary of XYZ Company Limited (a related company) and sought documents of the same description of that company between 1 January 1986 and 1 November 1989. Proceeding VG 132 of 1991 is concerned with this summons.
   The Hearing and Ruling

2. On 4 March counsel for the witness appeared before the NCA which for this hearing was constituted by a single member: s.25(2). Counsel indicated that the witness would produce some documents which were described in these terms:
   

What we have is a bundle of documents which have been copied and which have excised irrelevant materials. So we have taken out the relevant parts of minutes and we have attached relevant documents mentioned in minutes or that were before the Board, on topics which are those which have any conceivable relevance to matters which we understand to be the subject of the special investigation.

1. Argument took place, counsel being present to assist the NCA. After discussions between counsel the matter was adjourned sine die. By arrangement between counsel, the NCA was subsequently provided with what was described as a skeleton version of the minutes of ABC Company Limited. That document followed the usual format of board minutes in that it recorded the date, time and place of meetings and the persons present and also headings identifying each item in the minutes for the relevant period, each item bearing a sequential number. However the body of each item was omitted. I take it that the skeleton minutes were proffered as a means by which the NCA could satisfy itself that the bundle of documents produced on 4 March were the only relevant documents.

2. The matter came back before the NCA on 8 May. Counsel indicated that no agreement had been reached and there was a formal adoption of the arguments which had already been put at the earlier hearing. The member reserved his decision and gave a ruling on 24 May. The other two summonses had already been issued on 6 May. There was no hearing on the return date of those summonses (17 May) and it seems that they were treated as being in substance dealt with by the ruling of 24 May.

3. In that ruling the member briefly summarised the arguments of counsel and concluded as follows:
   

Taking into consideration the arguments of counsel, it is my opinion that the claim by ABC Company Limited that it is entitled to refuse to produce documents pursuant to the Summons is not justified.

The Authority is an investigatory body and its powers extend to matters which are relevant to its terms of reference. This does not however prevent the Authority from inquiring into any matter which it bona fide believes would assist it in its inquiry, providing it falls within the terms of reference. It is not for ABC Company Limited to determine what is relevant or irrelevant in relation to documents that are sought to be produced as they are not to know what investigations have taken place so far and what may or may not be relevant so far as the inquiry is concerned. In fact it is undesirable and may be oppressive to require a person to make judgments as to the relevance of their documents to the issues being investigated. It would not be apparent to ABC Company Limited as to the way in which such documents may be relevant to the Authority's investigation, they not being present throughout the course of the Authority's hearings.

The documents sought relate to a defined class of documents being minutes of meetings of the Board of Directors of ABC Company Limited, including attachments, annexures and documents recorded in the minutes. They relate to ABC Company Limited which is the subject of the investigation and to a defined period of time that is covered by the terms of reference. Therefore, in my opinion the documents sought in the summons fall within the terms of reference, the Authority having the bona fide belief that these documents will assist it in the inquiry.

Reasonable Excuse and Relevance

1. It may be that the provision for reasonable excuse in s.30(2) is primarily directed to physical or practical difficulties which might be encountered in the production of the documents sought: Controlled Consultants Pty Ltd v Commissioner for Corporate Affairs (1985) 156 CLR 385 at p 392, Corporate Affairs Commissioner of New South Wales v Yuill (1991) 10 Leg Rep 1 at p 4. While it was pointed out in the course of argument, and one can readily accept, that a large number of documents would be involved in the present case, no point was taken that the production sought would be unreasonable, in the sense of imposing oppressive physical or practical burdens, to such an extent that there was a reasonable excuse for non-production. Nor was it argued that the summons itself was bad as being too wide. Rather it was put that there was a reasonable excuse for the non-production of the documents because a substantial part of them, although admittedly not all, could not conceivably be relevant to the subject matter of the investigation. Counsel for the NCA before me in substance accepted that the irrelevance of a document sought could constitute a reasonable excuse for refusing to produce it. But, as he stressed, relevance in the context of a special investigation under the Act is relevance of a special kind.

2. It should be noted that the Act does not in express terms stipulate that relevance is a criterion for the production of documents by a witness summoned under s.28. The only limitation is contained in s.28(7) which states that powers conferred by s.28 "are not exercisable except for the purposes of a special investigation". This is to be contrasted with the express requirement in s.29. That section contains another power to obtain documents, but limited to "a document or thing that is relevant to a special investigation": s.29(1)(b). But it was not suggested that anything turned on this difference in the language between the two provisions.
   The Skeleton Minutes

3. Negotiated resolution of litigious disputes is usually a desirable aim. There is no reason why parties summoned before the NCA should not attempt to resolve disputed questions with the Authority. However, if agreement is not reached, there seems to me to be some difficulty with the proposition that a person summoned to produce a document which contains some material admittedly relevant can, consistently with the Act, refuse to produce it unless there is deleted from it other material which is claimed not to be relevant and rely on the NCA's refusal to accept the edited document as a reasonable excuse for production of the original version.

4. I say this for a number of reasons. First, s.32(8) of the Act contains quite detailed machinery for the excision or concealment of part of a document, but this is confined to very limited categories of material viz matter concerning personal affairs or details of earnings which, in either case, would have founded a ground for refusal of production on the ground of the privilege against self incrimination. Secondly, if a document contains material which is relevant, that sufficiently qualifies it as a thing subject to compulsory production under the Act and the Act would seem to require its production. Concerns, perhaps understandable, that the document also contains material that is confidential or commercially sensitive or just none of the NCA's business, and which is not relevant to the special investigation, would not provide a reasonable excuse for non-production. Protection against wrongful disclosure is safeguarded by the secrecy obligations imposed on the NCA by s.51 of the Act. Thirdly, there seems to be a practical dilemma. Either the person summoned is left to be the judge of what can be deleted, which cannot be right (apart from anything else, the person being investigated will not be in possession of knowledge that the investigator has), or the whole document is shown to the NCA, which would seem effectively to destroy the desired confidentiality.
   Review by the Court

5. It seems clear enough that the onus is on the person summoned to make out a reasonable excuse. If the NCA's decision is adverse then it is a matter for this Court on a review under s.30(2) to determine whether that decision was correct. The Act provides no guidance as to the nature of the review that is to be exercised, other than that the power to affirm or set aside the NCA's decision is discretionary. The review does not appear to be confined to questions of law only, and in my opinion it extends at least as far as enabling this Court to draw inferences of fact on the materials which were before the Authority.

6. Australian cases in which challenges were brought to powers of Royal Commissions and other bodies exercising statutory powers of investigation appear to establish the following propositions:
   1. The powers and functions of such bodies are administrative and
   

not judicial: Lockwood v Commonwealth (1954) 90 CLR 177 at p 181.

1. This is so even where the powers include the power to conduct

hearings, to summon witnesses and make decisions on refusal to answer questions or produce documents: Mannah v State Drug Crime Commission (1987) 13 NSWLR 28 at p 38.

1. Powers must be exercised in good faith and for the purpose of

the investigation of the matter referred to the body, which cannot go off on a frolic of its own: Riley McKay Pty Ltd v Bannerman (1977) 31 FLR 129 at p 134, Mannah at pp 39, 42, Ross v Costigan (No. 1) (1982) 41 ALR 319 at pp 334-5, Ross v Costigan (No. 2) (1982) 41 ALR 337 at p 351.

Relevance in the Context of Investigation

1. In Melbourne Home of Ford Pty Ltd v Trade Practices Commission (1980) ATPR 42,402, the Full Court (Brennan, Keely and Fisher JJ.) were considering a notice issued under s.155 of the Trade Practices Act 1974. The complaint there was that the information and documents sought were too widely defined and accordingly were irrelevant. The Full Court said (at p 42,411):
   

(The Chairman of the Trade Practices Commission) is engaged in a function of investigation, not in a task of proving an allegation. The power conferred by sec. 155(1) is in aid of that function and is a power which authorizes enquiries both wide in scope and indefinite in subject matter. It is an investigative power which is under consideration here and it is not possible to define a priori the limits of an investigation which might properly be made. The power should not be narrowly confined.....

There is no analogy to be made with interrogatories in litigation. Rules which are entirely appropriate to limit discovery with respect to issues defined by pleadings provide no sure guide to the manner of exercise of a power to ascertain facts which may or may not result in litigation. The investigative power may properly be exercised by enquiring into the existence of facts which do not themselves constitute a contravention or deny the possibility of a contravention. The power may properly be exercised to ascertain facts which may merely indicate a further line of enquiry, or which may tend to prove circumstances from which an inference can be drawn as to the existence of other facts which have a more immediate and proximate relationship to the matter under investigation. The width of the power and the possibility of its abuse both justify judicial examination of an allegation that the power is used to produce an undue burden or oppression, and render that examination difficult to perform.

......

The Court's jurisdiction is not to set the course of an investigation but to call a halt if it is shown that the investigation exceeds the powers conferred. Short of that point, the protection of the corporate citizen from harassment rests in the good sense of the repository of the power.

1. In my respectful opinion these observations are applicable to special investigations by the NCA, and notwithstanding that the special investigation will concern allegations of criminal activity (s.13(2)(a)) and the Authority's function includes the assembling of admissible evidence (s.12(1)(a)).
   Bona Fides

2. It was accepted in substance that if the documents sought were not relevant to the purposes of the special investigation, it would be no answer for the NCA to say that it was acting bona fide. If the subjective belief of the NCA was a conclusive answer then, as counsel for the applicants correctly submitted, the power of review conferred on the Court would be meaningless. An analogy may be found in the civil law concerning fiduciary powers. The exercise of a power for an ulterior or impermissible purpose will be bad notwithstanding genuine motives: Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285 at p 293. But the criterion of relevance has to be applied in a sense which is in accordance with the concept of investigation explained in Melbourne Home of Ford (supra). In the present case the applicants did not suggest bad faith on the part of the NCA. But it was said that the documents sought were not conceivably relevant and therefore their production could not be required under the Act for the purposes of the special investigation.
   Relevance in the Present Case

3. If lack of relevance in the sense described may constitute a reasonable excuse for non-production of a document, it seems to follow, as I have said, that the issue of relevance is to be determined prior to production. All that will usually be before the NCA, or this Court on review, will be the Attorney-General's notice under s.13 specifying the "general nature of the circumstances or allegations constituting the relevant criminal activity" and stating the relevant offences and the purpose of the investigation and the summons which specifies the nature of the documents sought. A comparison of the two will determine whether or not the documents sought could be said to be not conceivably relevant.

4. Consistently with this approach, counsel for the NCA did not present evidence to this Court, or before the Authority itself, as to what in fact were the proposed lines of enquiry or particular matters which were in fact being looked for in the documents sought. As has been said, to do so would run a serious risk of stultifying the investigation. Similarly, counsel for the applicants did not essay the task of going through the skeleton minutes item by item and pointing out those which it could be said were not conceivably relevant.

1. It was accepted by the applicants that the time frame of the period covered by the summons was not unreasonable in relation to the subject matter of the investigation.

2. That being so, I do not think it can be said that from their nature the documents sought, that is to say what might compendiously be described as Board papers of a company the securities in which are alleged to have been unlawfully traded by directors of that company, could be of no conceivable relevance. On the contrary, where the allegation is that directors of a company have dishonestly misused inside information for the purposes of dealing in the company's securities, the knowledge obtained by those directors from material which was before the company's Board would appear to be central to any investigation.

3. More specifically, there are good reasons for thinking that it would be quite reasonable for the NCA to want to look at all the Board papers for the relevant period and not just those which on their face bear some connection with the matter under investigation.

4. Minutes of all Board meetings are a statutory requirement: Corporations Law s.258(1), previously Companies Act s.253(1). The fact that something was not mentioned at a Board meeting may be, or become, relevant or may suggest a line of enquiry.

5. Another way in which matters in the minutes seemingly innocuous or unrelated to the subject matter of the investigation may be relevant is that they may show a common practice as to the reporting or recording of matters, which might be contrasted with what was done in the case of other matters directly the subject of the investigation.

6. Criticism was made of the passage in the ruling where the member of the NCA said that the documents sought "relate to ABC Company Limited which is the subject of the investigation". That criticism had some validity because the investigation is not into the company as such but in relation to directors of the company and their dealings in securities of the company. The subject matter of the investigation has been described in a compressed form which, taken in isolation, does create a misleading picture. However I do not think that read as a whole the ruling shows a sufficient misconception of the nature of the investigation to indicate that the member of the NCA mistook his function and thereby erred in law. Even if that were so, I would in the discretion conferred by s.32(4) not set aside the decision. This review has been fought squarely on the issue of relevance of the documents sought and I am satisfied that the decision that the member came to was correct.

7. The applications will be dismissed with costs including reserved costs.